Precious metals held outside an IRA are taxed as collectibles with a maximum 28% federal tax rate on gains, plus potential state taxes. This is significantly higher than the 15-20% long-term capital gains rates for stocks. In a Traditional IRA, precious metals grow tax-deferred—you pay no taxes on appreciation until you take distributions, which are then taxed as ordinary income (10-37% based on your bracket). In a Roth IRA, precious metals grow completely tax-free, and qualified withdrawals (after age 59½ and 5+ years) are never taxed. The IRA structure eliminates the punitive 28% collectibles tax entirely during the growth phase.

Withdrawals from a Traditional IRA are taxed as ordinary income at your marginal tax rate (10-37% federally, plus state taxes). This applies whether you take physical delivery of the precious metals or liquidate them to cash. The entire distribution amount—both your original contributions and all appreciation—is added to your taxable income for the year. If you're under age 59½, you'll also pay a 10% early withdrawal penalty unless you qualify for an exception (first-time home purchase, higher education, medical expenses, disability). The distribution is reported on Form 1099-R from your custodian.

Yes, Required Minimum Distributions (RMDs) from Traditional precious metals IRAs are fully taxable as ordinary income. RMDs begin at age 73 (if born 1951-1959) or age 75 (if born 1960 or later). The RMD amount is calculated by dividing your December 31 account balance by your IRS life expectancy factor. You can satisfy the RMD by either liquidating a portion of your precious metals to cash or taking physical delivery of metals equal to the RMD value. Failing to take your full RMD results in a 50% penalty on the undistributed amount. Important: Roth IRAs have no RMDs during your lifetime.

Yes, several exceptions allow penalty-free early withdrawals (before age 59½) from precious metals IRAs, though you'll still owe income taxes. Qualified exceptions include: (1) First-time home purchase (up to $10,000 lifetime); (2) Qualified higher education expenses for you or family; (3) Unreimbursed medical expenses exceeding 7.5% of AGI; (4) Health insurance premiums while unemployed; (5) Permanent disability; (6) Death (beneficiaries); (7) Substantially Equal Periodic Payments (SEPP/72(t) distributions). For Roth IRAs, contributions (not earnings) can always be withdrawn penalty and tax-free. Each exception has specific requirements and documentation needs.

Converting a Traditional precious metals IRA to a Roth IRA creates an immediate taxable event—the entire converted amount is added to your taxable income for the year at ordinary income rates. For example, converting $100,000 of gold adds $100,000 to your income, potentially pushing you into a higher tax bracket. However, after paying this upfront tax, all future growth and qualified withdrawals become completely tax-free. Strategic considerations: (1) Convert during low-income years or market downturns when metals values are temporarily lower; (2) Spread conversions over multiple years to manage tax brackets; (3) Pay conversion taxes from non-IRA funds to preserve IRA value; (4) Once converted, the decision is permanent and cannot be reversed.

Your IRA custodian handles most tax reporting, but you'll receive and need to file several forms: (1) Form 5498 (January/May) reports your contributions, fair market value, and RMDs—used for your records, not filed with your return; (2) Form 1099-R reports any distributions taken—must be reported on your Form 1040; (3) Form 8606 if you make non-deductible IRA contributions or take distributions from accounts with basis; (4) Form 5329 if you owe early withdrawal penalties or missed RMDs. For conversions, the conversion amount appears on Form 1099-R and must be reported as income. Keep all forms and custodian statements for at least 3 years after filing (6 years recommended).

State tax treatment of IRAs varies significantly by state. Most states follow federal IRA tax rules—Traditional IRA distributions are taxable income, Roth distributions are tax-free. However, 9 states have no state income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming)—residents owe no state taxes on IRA distributions. Some states offer additional benefits: Pennsylvania and Mississippi exempt all IRA distributions from state income tax. Other states may have different tax rates for retirement income. State tax treatment can significantly impact your after-tax returns, especially for large distributions. Consult a tax professional familiar with your state's specific rules when planning distributions or conversions.